Notes_for_Marginal_Product_and_Marginal_

Notes_for_Marginal_Product_and_Marginal_ - 11-1Chapter...

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Unformatted text preview: 11-1Chapter 11Production, Output and CostsObjective of Firms:Need to distinguish between two time frames:oShort RunoLong RunShort Run vs Long Run 11-2oDiscuss11-3Technological Constraints in the Short RunoTotal productoMarginal productoAverage product11-4Technological Constraints in the Short RunoIn the short run, a firm can only vary output by changing the quantity of its variable inputsoThe relationship between output and quantity of labour employed can be described by the following related concepts:oTotal productoMarginal productoAverage product11-5Total Product (TP):Total output that can be produced with:oGiven quantity of fixed inputsoVarying quantities of variable inputsTable 1: Total ProductLabourTotal Product11233641251762072282311-6oSee Diagram 1: Total Product 2468101214161820222426123456789LabourTP2468101214161820222426123456789LabourTP11-7Diagram 1: Total Product11-8Marginal ProductoThe change in total product that results from a 1-unit increase in the quantity of labour employedoChange in total product o oChange in the quantity of labouroMP=TP/LTable 2: Marginal ProductLabourTotal ProductMP = TP/L11123236341265175620311-972228231oSee Diagram 2: Marginal Product 13653212123456712345678LabourMP11-10Diagram 2: Marginal Product 11-11The Law of Diminishing ReturnsoAs a firm uses more and more of a variable input, with a given quantity of fixed inputs, the marginal product of the variable input eventually decreases11-12Average ProductoTotal product divided by the quantity of an input...
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This note was uploaded on 07/12/2010 for the course ECON 202 taught by Professor Angelatrimarchi during the Spring '10 term at Waterloo.

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Notes_for_Marginal_Product_and_Marginal_ - 11-1Chapter...

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